Perplexity AI plans to start running ads in fourth quarter as AI-assisted search gains popularity
Perplexity AI logo is seen in this illustration taken January 4, 2024.
Dado Ruvic | Reuters
Perplexity AI, the artificial intelligence startup that’s been embroiled in controversy due to accusations of plagiarizing content from media outlets, plans to start running ads on its search app in the fourth quarter, CNBC has learned.
The company, which specializes in AI-assisted search, is circulating a pitch deck, promoting the app’s reach and increasing usage. The company says its app has been downloaded more than 2 million times and has 230 million monthly users, while U.S. queries have increased eightfold in the past year, according to the presentation, which was viewed by CNBC.
Perplexity raised new funding in April that valued the company at more than $1 billion, doubling its valuation from three months earlier. But the app’s increasing popularity has highlighted concerns surrounding the ways the company surfaces content from other sources.
Forbes reported in June that it found a plagiarized version of one of its stories on Perplexity with no reference to the media outlet other than a small “F” logo at the bottom of the page. Weeks later, Wired said it also found evidence of Perplexity plagiarizing Wired stories, and reported that an IP address “almost certainly linked to Perplexity and not listed in its public IP range” visited its parent company’s websites more than 800 times in a three-month span.
The company told CNBC that, following the allegations, it made changes to how Perplexity’s Pages feature cites sources and also made updates so that its responses are better at citing outlets directly within the generated copy.
Last month, Perplexity debuted a revenue sharing model, giving publishers an opportunity to make money through the company’s search engine. Any time a user asks a question and Perplexity generates ad revenue from citing an article in its answer, Perplexity will share a percentage of that revenue with the publisher.
Media outlets and content platforms including Fortune, Time, Entrepreneur, The Texas Tribune, Der Spiegel and WordPress were among the first to join the company’s “Publishers Program.” Dmitry Shevelenko, Perplexity’s chief business officer, told CNBC in a July interview that if three articles from one publisher were used in one answer, the partner would receive “triple the revenue share.” He said the company had been working on the feature since January and that its goal is to have 30 publishers enrolled by the end of the year.
With advertising, Perplexity will follow a model called CPM, or cost per thousand impressions, according to a person familiar with the matter who asked not to be named because the details aren’t public. CPM prices will be more than $50, the source said. Search marketing firm Semrush wrote in a blog post last year that display ads on desktop typically have CPMs of around $2.50, while mobile videos have rates of about $11.10.
Perplexity said in its pitch deck that its key advertising categories initially would include topics like technology, health and pharmaceuticals, arts and entertainment, finance, and food and beverage. Advertisers will be able to sponsor “related questions” below answers and buy display ads to the right or a Perplexity-generated answer.
According to the presentation, more than eight in 10 Perplexity users have an undergraduate degree, while three in 10 are in a “senior leadership position,” and 65% are in “high-income white-collar professions,” such as medicine, law and software engineering.
AI-assisted search has been viewed by investors as one of Google’s key risks, as it potentially changes the way consumers access information online. OpenAI, which started the generative AI craze in late 2022 with ChatGPT, introduced a search engine last month called SearchGPT. In May, Google launched “AI Overviews” in search, allowing users to see a quick summary of answers at the top of results.
The U.S. has placed major chip export restrictions on Huawei and Chinese firms over the past few years. This has cut off companies’ access to critical semiconductors.
Jaap Arriens | Nurphoto | Getty Images
Taiwan has added China’s Huawei and SMIC to its trade blacklist in a move that further aligns it with U.S. trade policy and comes amid growing tensions with Beijing.
The two leading Chinese chip firms have been put on Taiwan’s “Strategic High-Tech Commodities Entity List,” along with many of their international subsidiaries.
Taiwan’s current regulations require licenses from regulators before domestic firms can ship products to parties named on the entity list.
In a statement on its website, Taiwan’s International Trade Administration said that Huawei and SMIC were among the 601 new foreign entities, blacklisted due to their involvement in arms proliferation activities and other national security concerns.
Huawei and SMIC are also on a U.S. trade blacklist and have been impacted by Washington’s sweeping controls on advanced chips. Companies such as contract chipmaker Taiwan Semiconductor Manufacturing Co already follow U.S. export restrictions.
However, the addition of Huawei and SMIC to the Taiwan blacklist is likely aimed at the reinforcement of this policy and a tightening of existing loopholes, Ray Wang, an independent semiconductor and tech analyst, told CNBC.
He added that the new domestic export controls could also raise the punishment for any potential breaches in the future.
TSMC had been embroiled in controversy in October last year when semiconductor research firm TechInsights found a TSMC-made chip in a Huawei AI training card.
Following the discovery, the U.S. Commerce Department ordered TSMC to halt Chinese clients’ access to chips used for AI services, according to a report from Reuters. TSMC could also reportedly face a $1 billion as penalty to settle a U.S. investigation into the matter.
Huawei has been working to create viable alternatives to Nvidia‘s general processing units used for AI. But, experts say the company’s advancement has been limited by export controls and a lack of scale and capabilities in the domestic chip ecosystem.
Still, Huawei is believed to have acquired several million GPU dies from TSMC for its AI chips by using previous loopholes before they were discovered, according to Paul Triolo, partner and senior vice president for China at advisory firm DGA-Albright Stonebridge Group.
A die refers to a small piece of silicon material that serves as the foundation for building processors and contains the intricate circuitry and components necessary to perform computations.
The Taiwanese government’s crackdown on exports to SMIC and Huawei also comes amid tense geopolitical tensions with Mainland China, which regards the democratically governed island as its own territory to be reunited by force, if necessary.
In April, the U.S. reaffirmed its commitment to support the existing status quo as China conducted large-scale military exercises off the coast of the island.
In statements reported by state media on Sunday, China’s top political adviser Wang Huning echoed Beijing’s position, calling for the promotion of national reunification with Taiwan and for resolute opposition to Taiwan independence.
An AI assistant on display at Mobile World Congress 2024 in Barcelona.
Angel Garcia | Bloomberg | Getty Images
Artificial intelligence is shaking up the advertising business and “unnerving” investors, one industry leader told CNBC.
“I think this AI disruption … unnerving investors in every industry, and it’s totally disrupting our business,” Mark Read, the outgoing CEO of British advertising group WPP, told CNBC’s Karen Tso on Tuesday.
The advertising market is under threat from emerging generative AI tools that can be used to materialize pieces of content at rapid pace. The past couple of years has seen the rise of a number of AI image generators, including OpenAI’s DALL-E, Google’s Veo and Midjourney.
In his first interview since announcing he would step down as WPP boss, Read said that AI is “going to totally revolutionize our business.”
“AI is going to make all the world’s expertise available to everybody at extremely low cost,” he said at London Tech Week. “The best lawyer, the best psychologist, the best radiologist, the best accountant, and indeed, the best advertising creatives and marketing people often will be an AI, you know, will be driven by AI.”
Read said that 50,000 WPP employees now use WPP Open, the company’s own AI-powered marketing platform.
“That, I think, is my legacy in many ways,” he added.
Structural pressure on creative parts of the ad business are driving industry consolidation, Read also noted, adding that companies would need to “embrace” the way in which AI would impact everything from creating briefs and media plans to optimizing campaigns.
A report from Forrester released in June last year showed that more than 60% of U.S. ad agencies are already making use of generative AI, with a further 31% saying they’re exploring use cases for the technology.
‘Huge transformation’
Read is not alone in this view. Advertising is undergoing a “huge transformation” due to the disruptive effects of AI, French advertising giant Publicis Groupe’s CEO Maurice Levy told CNBC at the Viva Tech conference in Paris.
He noted that AI image and video generation tools are speeding up content production drastically, while automated messaging systems can now achieve “personalization at scale like never before.”
However, the Publicis chief stressed that AI should only be considered a tool that people can use to augment their lives.
“We should not believe that AI is more than a tool,” he added.
And while AI is likely to impact some jobs, Levy ultimately thinks it will create more roles than it destroys.
“Will AI replace me, and will AI kill some jobs? I think that AI, yes, will destroy some jobs,” Levy conceded. However, he added that, “more importantly, AI will transform jobs and will create more jobs. So the net balance will be probably positive.”
This, he says, would be in keeping with the labor impacts of previous technological inventions like the internet and smartphones.
“There will be more autonomous work,” Levy added.
Still, Nicole Denman Greene, analyst at Gartner, warns brands should be wary of causing a negative reaction from consumers who are skeptical of AI’s impact on human creativity.
According to a Gartner survey from September, 82% of consumers said firms using generative AI should prioritize preserving human jobs, even if it means lower profits.
“Pivot from what AI can do to what it should do in advertising,” Greene told CNBC.
“What it should do is help create groundbreaking insights, unique execution to reach diverse and niche audiences, push boundaries on what ‘marketing’ is and deliver more brand differentiated, helpful and relevant personalized experiences, including deliver on the promise of hyper-personalization.”
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